Barclays’ 2015 buy-to-let rental cover change: £48 more per £100,000 loan

Historical archive — originally created 30 November 2015. This is a researched reconstruction of the missing Bespoke Finance article, not a verbatim copy. The lender rules and illustrative figures below describe an announcement made in 2015; they are not current mortgage criteria or a forecast of rent increases.

On 30 November 2015, Barclays announced that it would tighten the rental-cover test for new buy-to-let mortgage applications from 7 December 2015. The bank planned to increase the required interest coverage ratio from 125% to 135%, while keeping the stress-test interest rate at 5.79%. Applications submitted before 7 December would be assessed under the previous criteria. At the time, Barclays linked the change to the expected effect of restrictions on individual landlords’ mortgage-interest tax relief.

How did the £48 figure arise?

For a £100,000 interest-only buy-to-let loan, the 2015 illustration works as follows:

That is an extra £48.25 per month in qualifying rent for each £100,000 borrowed. Rounded to £48 per month, it comes to £576 over a year (or £579 using the unrounded monthly difference). This is the arithmetic behind the original headline. A £130,000 property was an illustrative property value, not the loan amount: the £48 calculation assumes borrowing £100,000 against it.

Importantly, a higher rental-cover requirement does not mean a landlord must or can raise the tenant’s rent by that amount. It changes the minimum rent used to assess an application. If the property cannot support the lender’s required rent, a borrower might need a smaller loan, more equity or a different lending solution; any rent increase depends on the local market and the tenancy.

What did the announcement mean for landlords?

The stricter test could reduce how much a landlord was able to borrow on a property with a given rent. Barclays said existing background buy-to-let and permission-to-let mortgages would continue to be assessed at 125% as part of its overall affordability calculation. This was a Barclays policy announcement, not an industry-wide rule. The lender also assessed wider affordability; the example above isolates the rental-cover calculation rather than guaranteeing an application outcome.

The policy and tax environment have changed since 2015. For a new purchase or remortgage, check current lender affordability rules and obtain individual mortgage and tax advice rather than relying on these historical percentages. See our buy-to-let news and buy-to-let mortgage options.

Contemporaneous source: Money Marketing, “Barclays to increase B2L rental cover ratio due to tax relief cut” (30 November 2015). The surviving Property Tribes discussion identifies the subject, but its discussion text was not recoverable from the page’s static response.